SOMEDAY, CALIFORNIA LEGISLATORS WILL CEASE WRITING BAD LEGISLATION – BUT TODAY IS NOT THAT DAY: A Not So New California State Department.

With the stroke of his pen, Governor Newsom morphed the Department of Business Oversight (DBO) into the Department of Financial Protection and Innovation (DFPI) with responsibility to enforce all state laws relating to “persons offering or providing consumer financial products or services.” It is an expansion of authority beyond what was vested in DBO. The Governor originally proposed the concept as part of his budget, but the Legislature amended it into AB 1864 (Limon), the California Consumer Financial Protection Law (CCFPL), when the budgetary process was derailed by periodic legislative shutdowns from COVID-19 quarantine and sanitation requirements.

Most of the provisions, but not all, in the CCFPL are from the federal Dodd-Frank Act Title X which currently regulates financial service providers and the banking industry. The federal Consumer Financial Protection Bureau was created to protect consumers from discriminatory and unfair practices, assure timely and understandable financial information, provide consistent enforcement and efficient operation of markets for consumer financial products and services while at the same not burden the industry with unwarranted regulations.

But it is not clear which companies are covered by a new law that’s more extensive than its predecessor. As the California Chamber of Commerce concludes at the above link, “if a financial service provider is not currently regulated, they probably will be in January 2021 when AB 1864 becomes effective. It is likely that licensees impacted by AB 1864 were not aware of the legislation.”

Whether or not you agree with this legislation, AB 1864, like AB5 on independent contractors, is unclear, and as such will cost the citizens of California extra money in litigating that the regulations mean, and rebranding a government agency. But then, as they say, the process is the punishment.

(H/T: NY)